Date: 20060313
Dockets: A-424-04
A-440-04
Citation: 2006 FCA
109
CORAM: DESJARDINS J.A.
LÉTOURNEAU J.A.
NOËL J.A.
A-424-04
BETWEEN:
EDMOND ST-ONGE
Appellant
and
THE ATTORNEY GENERAL OF CANADA
Respondent
A-440-04
BETWEEN:
HENRI ST-ONGE
Appellant
and
THE ATTORNEY GENERAL FOR CANADA
Respondent
Hearing held at Montréal, Quebec, on March 13, 2006.
Judgment
delivered at Montréal, Quebec, on March
13, 2006.
REASONS
FOR JUDGMENT OF THE COURT BY: LÉTOURNEAU J.A.
Date:
20060313
Dockets: A-424-04
A-440-04
Citation: 2006 FCA 109
CORAM: DESJARDINS
J.A.
LÉTOURNEAU
J.A.
NOËL
J.A.
A-424-04
BETWEEN:
EDMOND ST-ONGE
Appellant
and
THE ATTORNEY GENERAL FOR CANADA
Respondent
A-440-04
BETWEEN:
HENRI ST-ONGE
Appellant
and
THE ATTORNEY GENERAL OF CANADA
Respondent
REASONS FOR JUDGMENT OF THE
COURT
(Delivered from the bench at Montréal, Quebec, on March 13, 2006.)
LÉTOURNEAU J.A.:
[1]
In appeals
A-424-04 and A-440-04, this Court is hearing an appeal that questions the
interpretation of paragraph 5(2)(b) of the Employment Insurance Act,
S.C. 1996, c. 23, which states that insurable employment does not include the
employment of a person by a corporation if the person controls more than 40% of
the voting shares of the corporation.
[2]
As stated
by this Court in Canada (Attorney General) v. Cloutier, [1987] 2 F.C.
222, at page 225, the reason for this disqualification from Employment
Insurance benefits is based on the notion that the person who has a controlling
influence in a corporation is not dealing at arm’s length with it. In addition,
this rationale “only applies if the control in question is not in any way
contradicted by the facts” ibid. This control may be contradicted by the
facts when, as in this case, there is an allegation and evidence of a mock transaction
or a sham: see Sexton v. The Minister of National Revenue and the Tax Court
of Canada, A-723-90, May 10, 1991 (F.C.A.).
[3]
In both
cases in which he was called on to render decisions, Mr. Justice Tardif of the
Tax Court of Canada (judge) concluded that the employments of the appellants
Henri St-Onge and Edmond St-Onge were not insurable for the periods at issue
because each one of them controlled more than 40% of the voting shares of
9091-3005 Québec Inc. (Company), for which they worked.
[4]
The judge
came to this conclusion because in his opinion, on the basis of the alleged
presumptions and the evidence adduced, Jean-Charles Leblanc, who was said to
hold 30% of the voting shares of the Company, thereby leaving the two St-Onge
brothers with only 35% of the voting shares each, was nothing but a [translation]
“shareholder of convenience to allow the St‑Onge brothers to present a
legal structure such that they could hope to have their work deemed insurable
when they could not have done so otherwise”. (See paragraph 28 of the
decision.)
[5]
As the
judge stated at paragraph 29 of the decision, this was an [translation]
“arrangement whose ultimate goal was to render insurable a type of employment
which the Federal Court had already decided in several decisions was not
insurable”. According to the judge, [translation] “the structure established
was a sham to camouflage what in fact was essentially the appellants’ company”.
(See paragraph 44 of the decision.)
[6]
To reach
this finding of fact, the judge considered that the appellants did not testify,
did not have the so-called third director testify, and simply submitted
documentary evidence concerning the allocation of the company’s shares among
the three shareholders, that is, themselves and Jean-Claude Leblanc.
[7]
However,
the respondent did have Mr. Leblanc testify. The judge noted his hesitations,
as well as the contradictions with the previous statements made to the
investigators. (See paragraph 14 of the decision.) He assessed Mr. Leblanc’s
credibility about questions concerning his interest in the Company, his degree
of participation in the Company, and even his basic knowledge of the Company.
He concluded that Mr. Leblanc had not been kept informed of the Company’s
business, took no interest in it and had in fact waived beforehand his right to
vote. (See paragraphs 12 and 27 of the decision.)
[8]
We are of
the opinion that all the evidence the judge had and the presumptions invoked by
the respondent, which the appellants did not succeed in rebutting, allowed the
judge to conclude as he did. This was not an arbitrary or unreasonable decision
that would warrant, much less require, our intervention.
[9]
For these
reasons, the appeals in both cases are dismissed, but with a single set of
costs. However, the respondent will also be entitled to his disbursements in
each of the two cases.
“Gilles
Létourneau”
Certified
true translation
Michael
Palles
FEDERAL COURT OF APPEAL
SOLICITORS OF RECORD
DOCKETS: A-424-04
and A-440-04
STYLE OF CAUSES: EDMOND
ST-ONGE v. ATTORNEY GENERAL OF CANADA (A-424-04)
HENRI ST-ONGE v. ATTORNEY GENERAL OF
CANADA (A-440-04)
PLACE OF HEARING: Montréal, Quebec
DATE OF HEARING: March 13, 2006
REASONS FOR JUDGMENT BY: Desjardins J.A., Létourneau J.A., Noël J.A.
DELIVERED FROM THE BENCH BY: Létourneau J.A.
APPEARANCES:
|
Guy Cavanagh
|
FOR
THE APPELLANTS
|
|
Nathalie Lessard
Marie-Claude
Landry
|
FOR
THE RESPONDENT
|
SOLICITORS
OF RECORD:
|
Cavanagh & Almeida
New
Richmond, Quebec
|
FOR THE APPELLANTS
|
|
John H. Sims, Q.C.
Deputy
Attorney General of Canada
Montréal,
Quebec
|
FOR THE RESPONDENT
|
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